Sanctions against Syria: Tightening the screw

January 2012

Contacts

Key industry sectors

Introduction

Recent months have seen growing unrest, violence and protest in Syria. The response of the West has been to step up the sanctions against Syria, in an attempt to bring down President Bashar al-Assad’s military campaign.

The US and several European nations initially sought to bring diplomatic pressure on the regime by way of a UN resolution; however, their efforts were thwarted by Russia, which holds a veto on the UN Security Council, when it opposed the imposition of a wide-scale arms embargo or asset freeze. Therefore, the US and the EU have acted independently of the UN and introduced their own measures against Syria.

United States

On 18 August 2011, President Barack Obama issued an Executive Order implementing broad new sanctions against Syria. In the following days, other governments and multilateral organisations followed suit.

The US sanctions amount to a near-total embargo of Syria by the United States. Previously, the defining characteristic of the US sanctions against Syria was a broad prohibition on the export of most US-origin goods to Syria. In their new framework, the sanctions add many of the measures used in US sanctions programs aimed at Iran and Sudan, two of the most restrictive sanctions regimes administered by the United States.

Specifically, the Executive Order prohibits US Persons from the following:

  • Dealing in any way with the Syrian Government, its agents and instrumentalities, or any entity designated by the US Treasury Department;
  • Making new investments in Syria;
  • Exporting services to Syria, whether directly or indirectly;
  • Engaging in any transaction relating to Syria-origin petroleum or petroleum products; and
  • Facilitating any action by a non-US Person that would be prohibited were it taken by a US Person.

“US Persons” includes US citizens, US permanent resident aliens (i.e. “green card” holders), entities organised under the laws of the United States or any individual US state (including the entities’ non-US branches) and any person physically located within the United States.

The most restrictive provision of the new order prohibits the export of services to Syria. While the Executive Order does not define the contours of this restriction, “exportation of services” is, in the parlance of the US Treasury Department’s Office of Foreign Assets Control (OFAC), understood to include any services rendered by a US Person, the benefits of which are received in the sanctioned country. This definition is likely to be applied to the new Syrian sanctions.

Exports and re-exports to Syria of US-origin goods and technology remain prohibited, with limited exceptions for food and certain medicines. Imports into the United States of Syrian-origin services and goods not related to Syrian petroleum are not prohibited by the sanctions.

OFAC has issued several general licenses under the Executive Order, and they largely track the exceptions that exist under other US sanctions regimes (e.g. for personal remittances to Syria and the provision of certain internet-based communications services). The exceptions are narrowly drawn and will not be of use to most commercial entities.

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European Union

On 9 May 2011, the EU Council adopted Council Regulation No. 442/2011 which introduced restrictive measures on certain persons, entities and bodies identified as being responsible for the violent repression of the civilian population in Syria, and natural or legal persons and entities associated with them. Over subsequent months, the list of “designated persons” has been updated several times, mostly recently on 1 December 2011.

On 2 September 2011, the EU Council adopted Council Regulation No. 878/2011, which amends Regulation No. 442/2011 by, amongst other matters, imposing a prohibition on the purchase, import or transportation from Syria of crude oil and petroleum products and expanding the criteria for imposing asset freezes.

On 23 September 2011, the EU Council adopted Council Regulation No. 950/2011, which further amends Regulation No. 442/2011. The amendments include a prohibition on financing and investment in Syrian parties engaged in exploration, production or refining of crude oil and a ban on the direct or indirect sale, supply, transfer or export of new Syrian denominated bank notes and coinage, printed or minted in the EU, to the Central Bank of Syria.

On 13 October 2011 the EU Council again amended Council Regulation No. 442/2011 by way of Regulation 1011/2011, listing an additional entity and making a derogation permitting for a limited period the use of frozen funds subsequently received by that entity in connection with the financing of trade with non-designated persons and entities.

On 14 November 2011 the EU Council further amended Regulation 442/2011 by way of Council Regulation No. 1150/2011 which prohibits the European Investment Bank from making any disbursement or payment under or in connection with existing loan agreements with Syria and to suspend all existing technical assistance service contracts for sovereign projects located in Syria.

On 1 December the EU Council issued Council Decision 2011/782/CFSP which repealed Decision 2011/273/CFSP and extended the scope of the sanctions. The most recent Decision prohibits the sale, supply or transfer of key equipment and technology in the oil and natural gas industry in Syria in respect of refining, liquefied natural gas, exploration and production. In particular, it is prohibited to provide technical assistance or training and other services related to key equipment and technology in respect of the oil and natural gas industry. The financing (or financial assistance) for any sale, supply, transfer or export of key equipment and technology is also prohibited.

Overall, the EU sanctions prohibit the following within the territory of the EU; on board any EU flagged vessel or EU registered aircraft; by Member State nationals or Member State incorporated companies or in respect of any business done in whole or in part in the EU:

  1. The sale, supply, transfer or export of equipment which might be used for internal repression to any person or entity in Syria, or for use in Syria;
  2. The provision, directly or indirectly, of technical assistance related to goods and technology listed in the common military list of the EU;
  3. The import of crude oil or petroleum products into the EU if they originate in Syria or have been exported from Syria;
  4. The purchase of crude oil or petroleum products if they are located in or originated in Syria;
  5. The transport of crude oil or petroleum products if they originate in Syria, or are being exported from Syria to any other country (including countries outside the EU);
  6. The sale, supply or transfer of key equipment and technology for the following key sectors of the oil and natural gas industry: refining, liquefied natural gas, exploration and production, as well as technical assistance or training and other services related to such key equipment and technology.
  7. The provision, directly or indirectly, of any financing or financial assistance, including financial derivatives, as well as insurance and re-insurance for the prohibited activities set out at 3, 4, 5 and 6 above
  8. The sale, supply, transfer or export, directly or indirectly, of new Syrian denominated banknotes and coinage, printed or minted in the EU, to the Central Bank of Syria;
  9. The granting of any financial loan or credit to, the acquisition or extension of a participation in, and the creation of any joint venture with any Syrian person, entity or body engaged in the exploration, production or refining of crude oil; and
  10. The participation, knowingly and intentionally, in activities the object or effect of which is to circumvent the above-listed prohibitions.

There are limited exceptions to some of the prohibitions set out above.  In particular, the prohibited activities set out at 3, 4, and 5 above shall not apply to:

  • the execution on or before 15 November 2011 of obligations arising out of contracts concluded prior to 2 September 2011, provided that anyone seeking to perform such an activity or transaction related to such an obligation notifies the relevant authority at least seven working days in advance; and
  • the purchase of crude oil or petroleum products exported from Syria prior to 2 September 2011, or where the export was under an existing obligation and fell under the first exemption.

The exception in the first point above is quite clearly worded so that it applies to contracts which were in existence prior to the date of the Regulation. This would not include entering into new contracts (for example, to hire vessels to allow for the completion of other existing contractual obligations). It would, however, allow for the transport of Syrian crude oil on EU vessels, the contractual arrangements for which were in place prior to 2 September 2011.

The prohibition set out in (6) above shall not apply to the execution of an obligation arising from contracts awarded before 1 December 2011 and relating to investments made in Syria before 23 September 2011.

Further, the prohibition set out at (8) above shall not apply to the execution of pre-existing contracts (i.e. those concluded before 23 September 2011).

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UN sanctions

Syria is not currently subject to any United Nations sanctions.

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Arab League

The Arab League also approved sanctions against Syria on 27 November 2011. The sanctions include:

  • Cutting off transactions with the Syrian central bank;
  • Halting funding by Arab governments for projects in Syria;
  • A ban on senior Syrian officials travelling to other Arab countries; and
  • A freeze on assets related to President Bashar al-Assad's government.

Iraq and Lebanon abstained from the vote and both countries have indicated that they will not comply with the sanctions.  

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